Boris Johnson must ‘go German’ to avert a double-dip recession

Linda J. Dodson

As I reported on Monday, he proposes a “traffic light” system to cope with the risk of a second wave. It entails a policy of tightening counter-measures in localised areas as hospitals start to fill up, and as colours move from green to yellow, to orange, and then to red. There is enough warning time to intervene if the R rate spikes.

But if the British government is determined to press ahead with draconian measures and ultimately another national lockdown, regardless of much dissent in scientific circles, then it may not legitimately also cut off emergency economic support to those rendered unable to work.

The Treasury has already made a serious mistake by floating plans for austerity and fiscal tightening before the economy has reached self-sustaining recovery. This loose talk deters the business capex spending that we desperately need to avert a protracted slump.

Chancellor Rishi Sunak has been bounced into cutting off furlough support to a tenth of the workforce at the end of October, while Germany and France are preserving their support measures until the pandemic is fully controlled. As matters now stand, the UK is at risk of a double-dip recession this winter and the social trauma of three million unemployed just as it braces for the Brexit switch-over.

Paul Dales from Capital Economics says a fresh two-week lockdown would deliver another hit equal to 5pc of GDP and delay recovery by a year, ceteris paribus. If that happens it will be largely self-inflicted, and Boris Johnson will not be Prime Minister this time next year.

Treasury frugality is allegedly needed to placate the bond vigilantes and head off a runaway debt trajectory. You would hardly know that the UK has the second lowest sovereign debt ratio in the G7 at an estimated 102pc by the end of this year (IMF figure). It is relative debt that counts in the global beauty contest.

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